BAE Systems managing director Mike Turner warned yesterday that budget constraints would hit UK defence spending but said the company was well positioned to cope with any slowdown in the order programme.

Turner said it was no secret that the defence budget was under pressure and it was "quite likely" that some big programmes would see their delivery times extended.

"In the long term it's an issue. UK politicians have to decide where their priorities are towards defence spending as opposed to other priorities."

There has been speculation that the need to curb defence spending could mean a reduction in the number of the Astute submarines or Eurofighter Typhoon jets built.

Turner declined to give details of possible spending restraints but acknowledged there could be some changes to the programme to build two aircraft carriers for the Royal Navy.

"We have talked to the Ministry of Defence about what we can do to help with the challenge. It is up to them to make the decisions about what they can afford. That is something we have taken into account in our business planning."

Turner, who steps down as chief executive in August, was speaking as BAE announced a strong performance for 2007 and predicted another good performance this year. Sales rose by almost £2bn to £15.7bn, the order book increased by almost £7bn to £38.6bn and underlying profits rose by more than one-fifth to £1.48bn.

"We have excellent forward visibility and a further year of good growth is anticipated in 2008," the company said in a statement. Analysts welcomed the results and the upbeat statement, with several attaching a buy recommendation to the stock.

BAE said that all its four business areas had shown good profits performance. Yesterday's figures showed a particularly strong performance by the land and armaments business, where underlying profits rose from £168m to £312m.

BAE has been building up its land systems business, buying United Defense Industries and more recently Armor Holdings in the US. The purchases have brought a string of multimillion-pound orders for upgrades to armoured fighting vehicles and for mine-resistant ambush-protected vehicles.